State has $7B of other people's money

The American Red Cross is there. So are Scripps Health and Point Loma Nazarene University. Even the city and county of San Diego turn up on the state’s massive inventory of creditors.

California owes billions of dollars to people, companies, charities and even to local governments — and the pot of unclaimed property keeps growing.

The amount of orphaned cash, securities and other assets climbed by nearly 75 percent in 10 years, from $4.1 billion in 2004 to $7.1 billion in 2013, according to the State Controller’s Office.

And as long as individuals and institutions leave the assets in the state’s possession, state lawmakers rely on the cash to pay for schools, roads, prisons and every other routine service delivered by the California government.

The unclaimed property sits in the state general fund, which this year totals $108 billion.

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The debts are payable on demand — and checks are mailed out regularly — but the total value of dispossessed capital continues to rise year after year.

State officials say they do their best to track down the rightful owners of assets left behind when people move, die or simply don’t know that a bank or some other organization owes them money.

Critics say legislators have grown too comfortable with the billions of dollars in unclaimed property languishing in their general fund.

“It is totally wrong that this money is being held — especially from nonprofits and other government agencies,” said Thomas Elling, a taxpayer working to draw attention to the debts.

“Just about every city in the state comes up (on the list of creditors); just about every doctor and medical facility; every school district and college, every church,” he said. “It is so wrong.”

The State Controller’s Office maintains a searchable database of all the unclaimed property on its website, where anyone can plug in their name or the name of any person or organization. There are more than 1.2 million records on the list.

Claims can be filed electronically to make recovering the funds as easy as possible. The simplist payment requests can be processed in as few as 10 days.

In addition to cash, the index contains all sorts of property and oddball assets that were bequeathed or otherwise assigned to individuals and organizations.

Among the more unusual items in state custody: $500,000 in loose diamonds; 20 pounds of gold bricks; Los Angeles Police Department Badge No. 2241; a black-and-white snapshot of Humphrey Bogart and Lauren Bacall; and an aging tin of Underwood Norwegian sardines packed in tomato sauce.

Like the cash, the jewels, photos and other goods can only be recovered by completing a verification process that firmly establishes ownership.

Most of the assets land under state control after banks and other businesses fail to locate appropriate owners during lending, probate and other financial transactions.

Businesses are required to turn property over to the state after three years with no customer contact or account activity.

Creditors may apply for the unclaimed property any time — either to the “holder” before it’s transferred to the state or to the Controller’s Office once it enters government custody.

Despite the steady rise in unclaimed property, state Controller John Chiang has notably increased the amount of unclaimed property returned to creditors in recent years.

“Chiang has reunited owners with $3 billion in cash since January 2007 — nearly double the total returned in the previous seven years,” Chiang spokesman Garin Casaleggio said. “Also, he has returned more than 235 million shares of securities since January 2007 — 68 times the total shares returned in the previous seven years.”

In 2007, the year Chiang took over as controller, a federal appeals court ruled that state officials failed to provide unclaimed property owners adequate notice before taking on the assets.

The state responded with legislation laying out stricter rules for notifying creditors about unclaimed property, and Chiang has issued nearly 9 million notices to property owners alerting them to potential claims.

David Kline of the California Taxpayers Association said for years his organization was one of the loudest critics of the state’s efforts to find owners of unclaimed property.

The list “included state agencies, public figures, a restaurant that had been owned by then-Gov. Schwarzenegger and others who seemingly should have been easy to find,” he said. “We give kudos to Controller Chiang for reforming the process and making it easier for people to reconnect with their money and other property.”

Even so, thousands of the creditors in the controller’s database remain well-known — owners that are unaware they are due money or slow to apply for reimbursement.

The American Red Cross, for example, has almost 200 separate claims outstanding. A spokeswoman said the group relies on an independent firm to monitor unclaimed property claims.

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“Because we want to be respectful of the voluntary time provided for the work, we often let property listings accumulate and then file a claim once the total amounts exceed a few thousand dollars,” spokeswoman Laura Howe wrote in an email.

When U-T Watchdog asked Scripps Health officials whether they knew the charity was owed money, the organization said it was actively pursuing 282 claims.

Others “are too small to make it cost effective for us to pursue (the value of the unclaimed asset is less than $10) or the properties were previously pursued but for various reasons were denied by the state,” said spokeswoman Janice Collins.

Point Loma Nazarene University, which had nine claims included in the state database, said it reviews the unclaimed property list annually and files claims every year.

San Diego city and county officials said they conduct quarterly reviews of the state data and regularly submit reimbursement claims.

The Office of Revenue and Recovery “does its due diligence by searching all possible names, including department names, etc. and not just limited to ‘county of San Diego,’” the county said in a statement issued by spokesman Michael Workman. “ORR downloads list and sorts through properties ... researches each item ... and submits for ORR director’s review and signature.”